Proposals likely to anger hard Brexiteers, who believe transitional arrangements are designed to frustrate Britain's departure from the EU.

LONDON — Theresa May's government has confirmed it wants to negotiate a transitional customs union deal with the European Union in order to prevent cross-border business coming to a standstill after Brexit.

After the news was briefed to press on Tuesday morning, the Department for Exiting the EU (DExEU) published its official plan to leave the customs union in March 2019 and negotiate a totally "new" customs relationship with the EU, which would "minimise disruption" and be as "frictionless" as possible.

The British side hopes the EU will agree to a bespoke, time-limited customs arrangement, which will protect the UK economy from a "cliff-edge" Brexit and allow businesses to carry on as normal during an interim period, according to the position paper, which you can read in full here.

"The proposed model, which would mean close association with the EU Customs union for a time-limited period, would ensure that UK businesses only have to adjust once to a new customs relationship. This would minimise disruption and offer business a smooth and orderly transition," DExEU said in a press release.

May and her Cabinet want to retain as many benefits of customs union membership as possible without being part of it — possibly via a "temporary customs union." Britain will go into talks pursuing "the freest and most frictionless possible trade in goods between the UK and the EU," the paper says.

The plan is a victory of sorts for Chancellor Philip Hammond, who has urged colleagues to embrace a "business-friendly" Brexit based on temporary arrangements. The plans will likely irk hard Brexiteers, including those on the Tory backbenches, who want a clean divorce which isn't delayed by a transitional period of any sort. An unnamed Cabinet minister last month accused Hammond and his sympathisers of trying to "f--- up" and "frustrate" Brexit.

In a statement accompanying the position paper, Hammond said: "Our proposals are ambitious, and rightly so. They set out arrangements that would allow UK businesses to continue to trade with their European partners in the future, while expanding their markets beyond the EU.

"And in the near term they will reassure people and companies that, the day after we leave the EU, they will still be able to go about their business without disruption as we make a smooth transition to our bright future outside the EU and deliver a Brexit that works for Britain."

Brexit Secretary David Davis told BBC Radio 4 this morning the transitional period will "most likely" last two years and said he hoped a long-term customs arrangement will be in place by mid-2019. Asked whether Britain may be required to make financial contributions to the EU during this interim period, Davis said: "What happens in that sort of interim period you will have to leave me to negotiate, I'm afraid."

In a statement published on Tuesday, Davis says: "The way we approach the movement of goods across our border will be a critical building block for our independent trade policy. An interim period would mean businesses only need to adjust once to the new regime and would allow for a smooth and orderly transition.

"The UK is the EU's biggest trading partner so it is in the interest of both sides that we reach an agreement on our future relationship. The UK starts from a strong position and we are confident we can deliver a result that is good for business here in the UK and across the EU."

The Brexit Secretary also confirmed the government wants to negotiate new free trade deals with countries outside the EU during this transitional period — but will not be able to implement them. Cabinet Brexiteers like Liam Fox have been keen for Britain to leave the customs union as members are prohibited from doing trade deals with nations outside the EU.

Verhofstadt: UK plans are a "fantasy"

The feeling within Westminster is British negotiators will struggle to make progress when talks resume this month unless the British side has a clear understanding of what it wants post-Brexit trade relations to look like.

However, the EU has made it clear on several occasions it will not discuss future trade relations with Britain until significant progress has been made on issues like the rights of citizens and the money the UK must pay in financial obligations, or the divorce bill as it has become known.

Responding to the UK government position paper, a spokesperson for the European Commission said "frictionless trade not possible outside the single market and customs union."

The EU Parliament's chief Brexit negotiator Guy Verhofstaft described Britain's plans as a "fantasy" in a tweet posted before the paper was published.

Responding to the paper Steve Bullock, a former UK negotiator to the EU who BI interviewed last month, said: "It's a slightly better try than I'd expected, but is essentially more 'cake and eat it' as many have predicted."

Wiktor Dabkowski/DPA/PA Images

What does the government want to achieve?

The customs union is a central part of the 28-nation bloc's apparatus which means member states trade freely with each other and have all agreed to charge the same tariff on imports from outside of the bloc. This means countries importing goods into the EU pay the same tariff regardless of which member states they are importing to. Members of the customs union are prohibited from negotiating their own trade deals with countries elsewhere in the world.

DExEU claims its plan for a transitional customs deal followed by a permanent customs arrangement will guarantee minimal disruption in the short-term, and in the long-term meet three key objectives: 1) "ensure trade with the EU is frictionless as possible" 2) "avoid any form of hard-border between Ireland and Northern Ireland," and 3) "establish an independent international trade policy."

The Labour Party has attacked the proposals as "incoherent" and urged the government to retain the "same basic terms" of customs union membership.

"Labour is clear that we need to retain the benefits of the customs union and avoid a cliff-edge for the British economy," a spokesperson said. "That means committing now to strong transitional arrangements on the same basic terms we currently enjoy — including the single market and customs union."

The Liberal Democrats dismissed the plans as merely delaying the inevitable "pain" of an extreme Brexit. The party's Brexit Spokesperson Tom Brake said: "Even if they were agreed to by the EU, these proposals will only delay the economic pain caused by leaving the customs union. "We still face the prospect of more red tape for businesses, longer queues at our borders, and higher prices for consumers once the transition comes to an end." Brake added: "The only way to ensure 'free and frictionless' trade with the EU is to remain a full member of the Customs Union and Single Market. It doesn't matter how it's dressed up or how long it's postponed, the government's extreme Brexit will end up leaving Britain poorer."